Singapore could be a beneficiary of the failure of Silicon Valley Bank.
Singapore’s landlords have made the most of the post-pandemic reopening. With no lockdowns or curbs on in-restaurant dining, Paragon REIT, the real estate investment trust that owns shopping centres in the city-state and Australia, has more than doubled its annual dividend from 2020.
In recent years, a big share of office space in the financial centre has been taken up by global tech giants. They’re now cutting headcount. Singapore REIT prices have corrected sharply. REITs generate rental incomes and pass them in a tax-efficient manner to investors. The business is highly sensitive to interest rates. A half-percentage-point increase means distribution per unit will be lower, on average, by about 2 per cent, Maybank Research says. Until now, it looked like 2023 would be a year of higher-for-longer rates, a cheerless backdrop for dividends.
A revival in the fortunes of the technology industry may lead to more deals like the one last year when Amazon.comIn the past, whenever investors have demanded a premium of one standard deviation over the long-term average of the local government bond yields, the subsequent demand for Singapore’s REIT assets has usually seen a smart recovery.The spread hasn’t quite widened that much yet, and it’s impossible to say if the pattern will repeat.
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